I'm sorry Max. I can't continue this serious conversation with this undertitle.

I have never thought it was anything other than this. Other people claimed he didn't deserve it or it was awarded platform to spread as propaganda.


Good thing I (or as far as I can tell anybody) am not claiming krugman can't be questioned.

Got it, thanks. If you would like to discuss anything that Paul Krugman said, either from a pro or con perspective, then this is the correct thread. Otherwise, I've learned from the ban discussion thread that I have a right to expect to be protected from big meanies like you who cant stay on topic.

Its taken me hundreds of posts (and I'm still not all the way there yet) but I'm finally coming to accept that the confidence and bluster is really masking almost nothing. Its depressing to me. I give a MASSIVE benefit of the doubt to just about everyone, and even more to those who write well and appear confident. I've probably given you more rope than anyone I've ever argued with on 2p2. Its running out. I'm finally starting to begrudgingly realize that there just isnt anything there. Other posters have been claiming that since you started posting in politics but I thought they were being ridiculous and childish.

But I just dont quite have the imagination to be able to reconcile the post I've quoted here with any sort of useful, clever poster. Its embarrassing for ANYONE, but spectacularly so for someone who posts from the position of condescension like you do.

And that, of course, is a completely reasonable view. That the world's economists are all embroiled in a sinister scheme to give intentionally terrible advice regarding monetary policy is something that deserves serious consideration. The Swedes are the actors here, but who is really behind the curtains?


shane88888- I never claimed Krugman was right because he works for the New York Times, Christ you guys are terrible at identifying fallacies(and, in fact, whether an argument is being made at all). I was mocking Gordon's career choices and his irrelevance to the non-cross-burning demographic. His ramblings being presented as an authority to counter Krugman is some kind of joke.


Ineedaride- "Krugman creates right and wrong"? He's a high profile person who is also an economist, but it's not like he's a historically significant figure. He's public enemy number one to a tiny, tiny niche world of economically ignorant, gold-obessed bloggers, which trickles down to this forum through an accident of fate. But if he had never been born, the state of economics today would be essentially unchanged.

Levitt has a NYT blog, does he create right and wrong too?

Thread has gotten derailed a bit, but here’s my summary of Krugman's article in my own words. Since I find this analysis quite convincing, and many others clearly do not, I’m interested to see where our opinions diverge. Or where my understanding fails me. Macro makes my head spin, which is why I’ve tried to be very precise so that my errors are easily identified.

High interest rates on US debt are a bad thing, as they signal a lack of confidence in the US as a debtor. Large deficits can lead to increased rates. Thankfully, rates continue to be low. Moreover, overall borrowing has not increased, i.e. the amount of money borrowed by America(ns) is less than it was previously (see here). So there’s no blatant reason to be overly fearful of rising rates.

However, there is a fear that the low rates on long-term government debt aren’t actually representative of the confidence in the US as a debtor long-term. This fear is due to a belief that the buyers of long-term debt are doing so with a very risky investment strategy that could result in a drastic rise in rates. The strategy is described as a “carry trade”, the details of which and the dangers of which I understand to be as follows:

1. The investor (a bank) borrows money short term cheaply (since short term rates – the fed funds rate – are so low).

2. The investor uses the borrowed money to buy long-term government debt that pays a higher interest rate than they owe on the borrowed money.

3. If long-term rates rise, the investor will suffer capital losses. The strategy involves buying long-term government debt for X cents on the dollar and its value either increasing or remaining more or less constant (i.e. sellable at X cents on the dollar or better). Then the investor can profit the difference in interest between the long-term debt and the short-term borrowing. But if long-term rates rise, the value of the long-term debt decreases to less than what the investor paid for it. If this decrease in value is greater than the spread in interest, the investor loses money.

4. Capital losses could drive down demand for long-term government debt, pushing rates up even further.

If the “carry trade” as described is happening and is as dangerous as some people believe it is, then there’s a definite problem. Before discussing whether it is a problem, Krugman asks what would happen if there was no concern about the deficit at all. Due to the recession, the private sector is scared and wants cash, i.e. short term debt (money in the bank, like a checking account). Meanwhile, the government is spending extra money and financing it through long-term debt. Someone needs to bridge the gap for the transaction to work, i.e. buy the long-term debt. Banks can play this role with the money borrowed from depositors. So even in rosier debt situations, it’s still normal for financial players to be doing the carry trade.

Now Krugman acknowledges that it may well be a concern if the agents performing the carry trade really are doing so improperly (i.e. making a poor investment, thus making the capital losses and cascade of events causing rising interest rates more likely to occur). Evidence of this would be unusually low rates. Are rates unusually low? Citing recent long-term rates and future expectations of the more controllable short-term rates, Krugman says no, they are not.

Finally, Krugman says ok, what if rates do rise, and banks do take big losses. Is the deficit to blame? No, as the high rates would be as a result of the failure of the carry traders to be prepared for the contingency of rising rates, not the government borrowing too much and pushing up rates. And if the undercapitalization of the carry traders is the issue, the solution is to buy more long-term debt (to push long-term rates down) or issue more short-term debt (to remove the middle man).

And that’s basically it. Assuming my understanding of Krugman’s piece is correct, I find his argument to be very convincing. My only real apprehension comes at his remedy stage... if the banks really are carrying out a too-dangerous carry trade, what are the ‘correct’ long-term rates, and how would buying more long-term debt help reveal them? Perhaps they are quite a bit larger than we’d like or can deal with.

Is this really true? Do you really not think they are idiotic? I understand there is a big middle ground between "I think its idiotic" and "I agree with it and am interested in defending it to 2p2ers" but where do you fall on this? Genuinely interested.

And how much of that is based on your respect for him and default acceptance of expert opinion? IOW if one of these NYT articles was blinded (or worse, presented as the WORDS OF A RACIST *GASP*) how do you think you'd view it? I understand I'm asking you to imagine what you'd think if you didnt have biases, which is impossible, but its a genuine question.

Now how does "everybody who writes papers in the field" lean politically?

http://www.washingtonpost.com/wp-dyn...2005Mar28.html

I'm really not qualified to answer that question. You'll have to ask Krugman.

He's just so angry. It makes him so mad that other people aren't just like he is. It's like, anybody that's different than him is automatically wrong. I prefer to embrace ALL people, regardless if they are like me or not. I don't discriminate. I'm not a ra.......

Well, he should come to the drunk thread and relax.

some people here might respect UChicago economists:

http://www.newyorker.com/online/blog...gene-fama.html

Americans and American businesses have been deleveraging. Borrowing by the government has exploded, more than making up for the difference. It is completely disingenuous to be talking about the interest rates on government debt and then trot out numbers for public and private debt.

I struggle to begin to explain what is wrong with this. The business plan of borrowing short cheaply an investing long at a higher rate, made possible by the cheap money required to suppress short term rates is EXACTLY WHY WE ARE IN THE POSITION WE ARE IN. It allows institutions to lever up, borrowing cheap money from the air and investing it in long instruments whose values then became bubbled compared to their fundamentals. Once this fact is realized, the bubble liquidates in the collapse of the value of the long term assets and the inability to service the short term debt. Does any of this sound familiar to you? Like, say, the housing bubble? You know who wanted Alan Greenspan to lower interest rates and intentionally blow a housing bubble to "get us out" of the dot com bust? John Maynard Krugtard. What he is advising be done is to continue to borrow short and invest long and ignore that this must inevitably blow a bubble in US Treasuries. And when this inevitably blows up, what is the Krugtard's prescription then? No problem! Simply have the Fed buy as many long term treasuries as required to keep the price from collapsing! What could possibly go wrong?

I don't know, hyperinflation?

I honestly do not find any of it idiotic. i think alot of the criticisms come from people who don't know economics at a higher level than a NY Times article and sort of treat his writing as if it is meant to be a rigorous proof rather than a hugely dumbed down psuedo-explanation. It's sort of like saying Brian greene is an idiot for something you saw in The Elegant Universe

To say somebody is an idiot about macroeconomics I would at the minimum need to go through a grad level macro text book and make sure I could do all the problems. I also don't really make a huge effort to read his stuff though and he isn't very important to me. Krugman is always going to be a bigger deal to Acists because they disagree with him and since they can't claim that they are all super bright and can see things even smart people miss so they have to pretend that what he says is trivially wrong. Everybody analyzes the effects that sociology has on krugman but I think the effects are even stronger on internet echo chambers.


I don't really care at all about the racism stuff. If alot of the people who you think are authorities on economics also are racists, that probably sucks for you but it's not any of my concern.

I thought the consensus was that Krugman deserved the award and what he did has nothing to do with his NY Times work. Can you find a place where his liberal bias comes into play in the journal article I posted? Or would that paper have been a topcite no matter who wrote it?

So after reading that and the summary from Schmitty, I would be hard pressed to call anything in that idiotic, even if I disagreed with it.

There are 2 parts that I would consider mildly clever

I think this is a good way of presenting his case, even if he is wrong. And it is a bit more powerful than just showing that what some opponents are saying is wrong.


I liked this positive feedback mechanism and i haven't heard it used much before. It's an argument that republicans could use also but which the crazy people reversed, so it is a concept that alot of people probably agree with.


So if that was just presented to me without an authors name, i would guess that the person is fairly bright. I would give it an A in a high school class. I think a bright HS is probably capable of writing something similar, which is sort of good in a way since Krugman's goal is to explain things to laymen. I would definitely NOT be able to tell it was written by somebody who is world class, but i don't think I could ever tell that from a NY Times level article about econ.

Except that he repeatedly contradicts himself.

Bush deficits bad

Obama deficits good

Bush bubble bad

Obama bubble good

Bush stimulus bad

Obama stimulus good

etc.

The guy is a partisan hack for the NYT. He may well be a good economist in academia but he is a ****ing joke as a columnist.

Wouldn't want to derail the incredible success of current economic policy especially when govt's going to create a host of "green" jobs in the private sector reported to be $135, 000 a job .

Fact Sheet: $2.3 Billion in New Clean Energy Manufacturing Tax Credits

Recovery Act investments of up to $2.3 billion for advanced energy manufacturing facilities will generate more than 17,000 jobs. This investment will be matched by as much as $5.4 billion in private sector funding likely supporting up to 41,000 additional jobs.


Yeah wouldn't want to elect a bunch of crazies to derail rational fiscal policy like this.

Well not me, I am not qualified to judge whether his modeling work was good enough to win the Nobel, it seems that it is. I am however qualified to judge his NYT columns which are written for a layman, have little to nothing to do with his nobel work, and are uniformly teribad partisan hack jobs.

PM taso IMO

awesome response thanks. I will try to give it the time it deserves in a bit, most likely others will do a better job than me before i get to it.

I think the people that claimed the nobel was awarded by the committee for propaganda reasons without understanding trade theory or Krugman's contributions to it are also partisan hacks.

Krugman and some/much of his work is brilliant, but the Nobel prize for economics has never been the same since they gave part of the 1974 award to a relative unknown economist who pwned them:

Speech at the Nobel Banquet, December 10, 1974 (I should just post and bold the whole thing)

The Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel 1974 Lecture - Lecture to the memory of Alfred Nobel, December 11, 1974: The Pretense of Knowledge

I don't see how this is relevant at all. Krugman was a columnist BEFORE he won a nobel prize and it seems like only you guys have a hard on for it. The rest of the world didn't really seem to care

J.R., I believe you missed a few words. Maybe you ran out of underliner? Here, this will help:
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Cheers!